When are personal assets joint assets?
This question pervades initial conferences for divorce clients meeting with a lawyer, and throughout the divorce litigation process, and still during trial.
Divorce law uses the same language as the IRS – what is the “character” of the asset? Is it “marital” and therefore subject to the presumed 50/50 distribution? Or is it “non-marital”, above-the-line, and distributed intact to the single spouse owner, outside the divorce judgment?
The rub is when one spouse argues that what was once arguably a non-marital asset of the other (such as a piece of property owned before marriage or money received via inheritance before or during marriage), is now a marital asset subject to equitable division and distribution to both spouses, because its “character” has been changed by subsequent occurrences.
A case decided July 15, 2015, Dravis v. Dravis, by Florida’s Second District Court of Appeal, gives good guidance which can help spouses better know what to expect as a result of their actions, should they become divorced some day. In Dravis, the husband received half of the wife’s funds she had received as personal gifts from her mother over the years on her birthday and at Christmas. The total amount was substantial - $78,000. The money was still there when the parties decided to divorce. And the husband got half of it!
He did so, the appellate court ruled, because:
(1) The wife had deposited the money into a joint account with her husband; and
(2) The parties had deposited other joint money into the account.
As an aside, it could be noted that when the parties separated, the wife took the $78,000 out of the account and gave it back to her mother. The Court said, that does not matter. The wife’s mother had to give half to her former son-in-law.
The lesson to be learned: If you want to keep pre-marital property, or gifts or inheritances received during marriage, just yours, forever, then keep them in a separate account in your name only. Or, if you do place gifts or inheritance into an account titled jointly with your spouse (for survivorship purposes; while your marriage is intact), don’t add new marital funds to it (that is, money earned by either of you or received by your spouse). If you do, you will change the “character” of your money or asset from sole to joint, and your spouse is entitled to half of it should you divorce.